Retirement planning: Nest egg or goose egg?

For Gayle and Jerry Dustrud, retirement meant buying a high-rise condo in downtown Minneapolis. Enjoying a three-week trip to China. Seeing shows at Orchestra Hall.

Suddenly, it might mean taking part-time jobs.

"I thought that we were pretty well set," said Gayle, 61, a former elementary school teacher who, when she retired in 2000, never dreamed she would reenter the workforce. "We had been pretty careful about planning. Now, we're concerned."

The Dustruds' nest egg, which for years had delivered steady, 5 percent bumps, has dropped as dramatically as the rest of the nation's.

The long stock market fall has wiped out $2 trillion in Americans' collective retirement savings -- down about 20 percent in value from the middle of last year.

Folks on the streets of downtown Minneapolis confirmed the effects experts had predicted. Baby boomers once on the brink of retirement now expect to continue working longer. Retirees are struggling to figure out how they'll last on what's left. And people of all ages -- already feeling the effects of rising costs and declining home values -- are just plain worried.

"It feels like the first days after 9/11, when everything was kind of eerie," said Karen Mendenhall, 59, a legal secretary. "You don't know what to do. You've been counting on this money. You've been putting it into a 401(k) and watching it increase over the years, and suddenly half of it's wiped out. It's scary."

Traditional pension plans -- set aside by employers -- have also been affected, although slightly less so, the analysis showed.

Minnesota's public pensions systems' assets are down 5 percent for the fiscal year ending in June 2008, and have dropped further since then, said Mary Vanek, executive director of the Public Employees Retirement Association of Minnesota.

"We have confidence that we'll be able to weather this," she said. "We're a long-term business, so we have their working career to make that 8.5 percent" target return. Retiree benefits are not adjusted downward because of investment losses, so "employees do not need to worry," she added.

Working longer

The recent bad news -- the Dow has lost more than 1,000 points since Friday's close -- will likely escalate an existing trend, experts said. Nationwide, the number of people age 65 and older working full time has been climbing, said Kyle Uphoff, regional analysis manager at the Department of Employment and Economic Development. Speculation mostly centers on rising health care costs, Uphoff said.

"We've been seeing it go up over the past few years," Hine said. "Part of a person's retirement nest egg is often their home, and seeing those values decrease [earlier] caused them to make the same changes."

Whether they'll find work is another question. Minnesota is down 16,000 jobs since January.

Dustrud can't predict whether she and her husband will try to find work. But if they do, she doesn't expect that they'll be able to jump back into their careers, she said. "We've been out of it for so long."

Wells Fargo senior economist Scott Anderson noted the potential of falling dominos. Seniors staying longer at their jobs could hold back others' promotions.

"It gums up the system," he said. "People who were counting on this money, who thought they had it in the bank so to speak, now see their wealth evaporate. That's going to have a dampening effect on consumer spending."

The falling pensions, as part of the larger economic crisis, are "cratering this election season," said Larry Jacobs, director of the Center for the Study of Politics and Governance at the University of Minnesota.

"This is not an abstract issue like Iraq for Americans; it's something they wrestle with every day," he said. "Their 401(k)s for many people are what they work for and watch and build."

Finances are now the top worry voters bring to this election, Jacobs said. "It's the equivalent of a financial 9/11. There are parallels, with the same sense of fear, insecurity and risk."

An AARP survey released this week shows that 13 percent of Americans 45 and older are tapping into those shrinking retirement accounts or other investments to cover day-to-day expenses. About 20 percent have stopped contributing to retirement accounts during the past year.

Earlier this year, AARP found that the lousy economy, specifically, has up to one-fourth of respondents 45 and older planning to work longer.

"I feel not only for myself but for my whole generation," Lindberg said. "I don't know what people are going to do. Retirement seems to be becoming a thing of the past."

jross@startribune.com • 612-673-7168 hcummins@startribune.com • 612-673-4671